Palm expected to see further losses

DanGallagher

SAN FRANCISCO (MarketWatch) -- Palm Inc. is expected to see another period of losses and declining revenue for the first fiscal quarter as the company continues to work through a large-scale restructuring effort.

Palm
PALM, -0.44%
is slated to report results for the quarter ended Aug. 31 after the close of trading Thursday. The stock was last trading down 4 cents at $7.17.

For the quarter, analysts are expecting net losses to grow to about 20 cents a share, according to consensus estimates from FactSet Research. The maker of smart-phone devices reported a loss of a penny per share for the same period last year.

Revenue is expected to decline by nearly 9% to $329.9 million from $360.8 million last year, according to FactSet estimates.

Analysts expect unit sales to remain strong thanks to the Centro, a low-cost smart phone that has sold more than 2 million units since its launch in October of last year, according to Jim Suva of Citigroup.

In a note to clients Monday, Suva cautioned that sales may have come under pressure from the introduction of the 3G iPhone in July.

"We believe that Centro benefited not just from heavy subsidies [largely borne by Palm] to reach $99 retail price but also from a window of opportunity before mid-July 3G iPhone availability," Suva wrote. "However, we believe this window is closing with increasing 3G iPhone availability and upcoming launches of key RIMM [BlackBerry] products and smart phones from other competitors."

Palm also released a new version of its once-popular Treo line during the quarter. The device runs on the Windows Mobile platform and is available exclusively through Sprint.

Palm's shares have gained more than 20% since the last earnings report in June. Mike Abramsky of RBC Capital credited the gain to the market's anticipation of new handsets feature a new operating system the company has under development.

But he added that Palm remains a "show me story" until it gets its operations turned around.

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